On April 1, the U.S. Trade Representative (USTR) notified Congress of six changes to existing laws that will be required to bring the United States into compliance with its obligations under the Trans-Pacific Partnership (TPP). Four of the changes are necessary to implement the TPP’s rules of origin provisions. Another will conform a merchandise processing fee to the Agreement’s requirements relating to market access for goods. The final change – a simple revision of the Trade Agreements Act of 1979 – will enable the U.S. to implement the TPP’s government procurement chapter. It will permit the President to designate products from TPP parties as eligible for a waiver of discriminatory purchasing requirements.
The Trade Agreements Act or TAA authorizes the President to waive discriminatory provisions for countries that provide the U.S. with reciprocal access to their government procurement. (In 1980, that authority was delegated to USTR.) The revision of the Act will add the TPP to the list of agreements in which the U.S. has exchanged government procurement commitments with trading partners. They include the WTO Government Procurement Agreement (GPA) and numerous free trade agreements (FTAs).
Based on the agreements, USTR has issued TAA waivers for than 60 countries, including eight TPP parties: Australia, Canada, Chile, Japan, Mexico, New Zealand, Peru and Singapore. As a consequence, to implement TPP, the U.S. particularly needs the TAA waiver authority to allow it to purchase goods and services from Brunei, Malaysia and Vietnam on the same basis as those from the U.S.
In practice, the TAA waiver is applied narrowly. According to a report by the U.S. Government Accountability Office (GAO), the waiver has been applied to only two of the numerous preferential requirements that Congress has enacted over the years: the Buy American Act of 1933 (BAA) and the U.S. Department of Defense’s (DoD) Balance of Payments Program. The BAA restricts U.S. government purchases to U.S.-made supplies and construction material for use inside the U.S, unless an exception applies. The DoD applies similar restrictions to its procurement outside the U.S.
In its summary of the TPP’s procurement chapter, USTR listed a number of domestic preferential programs that would not be affected by the TPP, and thus not covered by the waiver authority. They include small business set-asides, Buy America requirements attached to federal funds for state and local mass transit, highway and water projects, transportation services, food assistance and farm support, and certain DoD procurement, including defense systems and textiles.
USTR submitted the notice of changes to existing laws in accordance with the requirements of the 2015 Trade Promotion Authority.
Jean Heilman Grier
April 8, 2016
Buy American Requirements: A Djaghe White Paper
TPP Procurement: Initial Assessment of Agreement
Trade Agreements Act of 1979: Broad Authority, Narrow Application
Trade Negotiations: USTR’s Consultation Guidelines